Gibraltar Considers Legal Action over UK Tax Legislation

The United Kingdom proposed Point of Consumption Tax has faced overwhelming opposition over the past few months and it may soon face challenges in court.

The Gibraltar Betting and Gaming Association along with several major operators have submitted written evidence urging the UK government to abandon these proposed changes and have threatened legal action if the amendments are maintained. The written submission to the UK Government’s Culture, Media, and Sport Committee questions the intention of the new proposals and condemns the significant costs to both operators and the customers.

The original Gambling Act of 2005 required UK operators to pay a 15% tax on gross profits, but exempted operators in the Gibraltar, Isle of Man, Alderney, and Malta jurisdictions from this levy. Given the inherent advantage of the “white list”, major operators moved their headquarters to these tax-exempt areas. Gaming operators on the “white list” include Ladbrokes, 888, Gala Coral, William Hill, Betfair, and Rank. The Point of Consumption Tax proposal will eliminate the tax-exempt status of these major operators and impose a 15% levy on gross profits.

The Gibraltar Betting and Gaming Association along with several operators believe the proposed taxes are unreasonable and hurt the ability of the operators to properly service customers. They contend that the increased costs will lead to cuts in marketing and expenditures as well as increased costs to the customers. These consequences will lead to a weakened gaming market and a decrease in taxable revenue. Furthermore, the Association contends that the proposed changes are a dramatic change to a free market system and may hurt the economies of the respective jurisdictions.

According to eGaming Review, twenty-three of the twenty-four members under Gibraltar licenses have paid an average of £22,000 to hire two experienced QC’s to prepare for potential legal action against the UK government. The UK government has indicated its desire to have these proposals enacted for the beginning of 2014. However, the new tax regime will be facing some tough challenges before its possible enactment in a year.